What’s After BRICs?
By APICS CEO Abe Eshkenazi, CSCP, CPA, CAE
As we begin to seriously consider execution of plans in the New Year, your business leaders might be examining the next big markets for your products and services. We, at APICS, also have to keep our eyes on these developments because we want to make sure our channels are evolving to provide education and certification where it is needed. Therefore, the Harvard Business Review Blog Network article on emerging markets caught the attention of the whole newsletter team.
“I find more and more multinationals looking to new frontier markets for growth while demanding profitability from their emerging-market operations,” writes Richard Leggett, CEO of Frontier Strategy Group, a provider of information services on emerging markets.
Leggett observes that executives still are investing heavily in Brazil, Russia, India, China, and South Africa (BRICs), but they also are pursuing other emerging markets, the so-called “next frontiers.” He outlines activities his firm is seeing in specific regions.
While China and India are still on company radar screens, Association of Southeast Asian Nations (ASEAN) is gaining momentum. These countries, which include Malaysia, the Philippines, Singapore, Thailand, and Indonesia, have expanding middle classes who are young and live in urban areas—all signals that support private consumption.
In Latin America, Brazil and Mexico have slowing growth rates, while other countries, such as Peru, are showing promise. Leggett’s firm estimates private consumption in Peru to grow 54 percent between 2010 and 2015. “Real increases in personal income and access to credit will support growth across all retail categories, but the automotive, consumer electronics, and food and drink sectors will outperform, as consumer taste becomes more sophisticated,” Leggett writes.
Slow growth also permeates the traditional business centers in Eastern Europe, the Middle East, and Africa. Considering that 64 percent of Russia’s gross domestic product is outside of Moscow and St. Petersburg, some investors are turning to Russia’s regional markets through third-party distributors. These distributors enable companies to “build market share, strengthen their competitive position, drive profitability, and contribute to the country’s long-term sustainability.”
Lastly, it’s no secret that many consider sub-Saharan Africa to be next on the list of emerging economy success stories. As South Africa’s growth diminishes, Nigeria and Angola might become business hotbeds. For example, in Nigeria, car manufacturing is booming, with carmakers from all over the planet opening dealerships and building local assembly plants.
“In emerging markets, what began primarily as a growth strategy has evolved to a dual mandate of growth and profitability,” Leggett writes. “Executives must act fast to capitalize on the final frontiers, while market share is still there for the taking.”
Making supply chain part of overall strategy
Consider the following APICS Operations Management Body of Knowledge Framework definition: “The strategic plan typically looks three to five years into the future. It normally is reviewed annually, and sometimes quarterly, depending on market conditions. The plan, from an operations view, is to project plant and equipment needs and corresponding funding requirements.”
With that definition in mind along with the opportunities I wrote about earlier, I know many of you are thinking about risk. That’s a natural response. According to the APICS Supply Chain Risk and Reward Folio, risk itself may be unavoidable, but there may be choices on the specific risks you have to face based on the design and operation of the supply chain. It is critical to have answers to the following questions before pursuing business in an emerging economy: What is the reward for enduring the risk? Is the risk worth the reward?
For many business leaders, the increase in market share and profitability means the risks associated with operating in emerging markets are worth it. What it also means is that supply chain risk might take a place more at the forefront of business operations. Are you and your company ready?
APICS offers a wide variety of risk management education and resources. In addition to the APICS Risk Management Certificate, APICS also offers free reports and folios to members on a variety of relevant topics, including risk management.
APICS can help you and your company prepare for the “next frontier” of your business. Visit apics.org today.